Visible Hands: Sorry, We’re Closed 🚫
Small businesses are struggling as many larger ones have been able to rally.
Small businesses are struggling as many larger ones have been able to rally.
As of 2018, the United States counted 30.2 million small businesses (when defined as a firm with fewer than 500 employees). According to the Wall Street Journal in August, 1 million small businesses have shuttered (according to the New York Times, 400,000 have). And more recently, the WSJ has reported on the bifurcation of restaurant businesses. While Domino’s and Chipotle and other chain restaurants grow, tens of thousands of local restaurants are closing.
It’s less because people really want pizza and burrito bars and more to do with these companies’ capitalization. These larger chains are public companies with huge credit lines compared to your downtown, independently-owned spots. Meanwhile, 70% of banks this summer reported tightened standards when it came to loans for small businesses (on par with the 2008 financial crisis fallouts), while bankruptcy filings for (large) public companies have actually been below the 2008 financial crisis numbers. This is all despite the fact that the Paycheck Protection Program (PPP) was enacted in hopes of protecting small business, eye roll moments aside.
The struggle to stay afloat rings true for many small businesses. One survey of 6,325 small-business owners found that 42% of respondents said they were at risk of going out of business in the fourth quarter. Even the Pentagon sees this as an issue.
This is likely to accelerate existing trends towards bigger companies having more market share and power for the foreseeable future (employment in small businesses had fallen to 33% in 2018 from 40% in 1989). Employment at companies with 500 or fewer people fell 10.8% in June from February, before Covid-19’s many impacts were seen. Before the pandemic, non-financial companies had $4.1 trillion of cash, the most ever recorded. Then, large businesses were infused with up to $5 trillion in loans from the CARES act. This imbalance between the capital access of large companies and small ones, may lead to a number of mergers and acquisitions.
As Congress debates the merits of another relief package, one of the major holdups (beyond an impending election) is disagreement about the size and support that should be offered to small businesses, which infuse the economy with more competition and jobs. Can small businesses get enough capital to fight another day?
Many of these suggestions come from McKinsey’s report on this topic; s/o to one of our readers who’s a co-author on this!
As an employee:
Push to work with small business suppliers, rather than their more well-financed equivalents. In particular, consider your vendor diversity as you think about small business suppliers (for more, check out this HBR article on the topic)
If you work for a small business, check out American Express’s Stand for Small resources here
As a citizen:
Support relief that incentivizes financial institutions to invest in small businesses struggling with lack of capital.
Encourage your local government to help cover the expenses of implementing physical distancing measures at small businesses, like in Boston and Honolulu, and to supply businesses with PPE.
Countries like Spain and Canada have been tinkering with basic income. According to Nature, “Spain launched a website offering monthly payments of up to €1,015 (US$1,145) to its citizens to spend however they choose” - to 850,000 of its poorest families.
As a consumer:
Support small businesses by shopping at them whenever they can as an alternative to large companies. Sure, it was Prime Day recently, but have you gotten anything on Etsy lately?
As an investor:
People have still been starting companies; business applications are up 40% this year from last. However, continued tightened capital restrictions on small businesses will continue to make growth difficult. You don’t have to be an accredited investor to support people trying to build a company; check out Kickstarter or other crowdfunding platforms to see if there are ideas that inspire you!
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Groups File Lawsuit After Virginia State Websites Shut Down for Hours on Last Day of Voter Registration: “Its deepest impact was felt by the state Department of Elections during what has been a record turnout for early voting in Virginia.”
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Stay connected with us through Medium, Instagram, Twitter, Facebook, LinkedIn, and, of course, email! Please invite any friends, roommates, coworkers, armchair activists, and Domino’s lovers to join the movement. See ya next Thursday!
